Webb, E. R.

English

University of Kentucky

Kentucky Law JournalVolume 29 | Issue 4 Article 91941Can a Third Party Beneficiary Who is Not a PayeeEnforce a Contract for His Benefit?E. R. WebbUniversity of KentuckyFollow this and additional works at: https://uknowledge.uky.edu/kljPart of the Contracts CommonsRight click to open a feedback form in a new tab to let us know how this document benefitsyou.This Comment is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky LawJournal by an authorized editor of UKnowledge. For more information, please contact UKnowledge@lsv.uky.edu.Recommended CitationWebb, E. R. (1941) "Can a Third Party Beneficiary Who is Not a Payee Enforce a Contract for His Benefit?," Kentucky Law Journal:Vol. 29 : Iss. 4 , Article 9.Available at: https://uknowledge.uky.edu/klj/vol29/iss4/9KENTUoEY LAW JOURNALan Ohio decision holding that the term "heirs" as used in a deed todescribe the remaindermen, included an adopted child of the lifetenant' It was presumed in that case that the grantor intended thewords in the deed should have their ordinary meaning, nd that toexclude an adopted child the grantor would have to do so expressly.The Kentucky court said that the Ohio statute on adoption"' was muchbroader than the Kentucky provision and that the cases were dis-tinguishable. It is submitted that the Statute in Kentucky is suffi-ciently broad to include an adopted child in a deed where the remain-dermen are described as "her heirs". It must be admitted that theadopted child is an heir of the foster parent. Suppose A conveysland to B, a stranger, for his life and at B's death to B's heirs. B hasan adopted child, his only heir-at-law, who claims the land. TheKentucky court could scarcely hold that the adopted child did nottake the land, because by the statutory provisions Of this 'Common-wealth the adopted child is the heir of the fosterparent. Should itmake any difference if A is the adopted child's foster father's parent?It seems difficult to frame language more direct and expressive thanthat used in the Kentucky Statute showing the intention to place anadopted child upon an absolute equality with natural children. Cer-tainly the grantor, in the principal case, should be presumed to knowthat it was possible for the life tenant to adopt a child and that suchchild would be an heir of the life tenant. It is submitted that thefictitious intent of the grantor should not be allowed to overrule theordinary interpretation of the words of the deed.When the court supplied words limiting succession to thedaughter's heirs-at-law, who should be of her blood, it amendedrather than construed the deed. The word "heirs" has an ascer-tained meaning, and here scarcely requires interpretation. Therebeing nothing in other portions of the deed to indicate that the word"heirs" was not used in its ordinary sense, the court departed from,that primarily meaning of the term for the purpose of giving effectto what it guessed was the intention of the grantor, feeling perhapsthat such a departure constituted a fairer distribution of the prop-erty. The grantor should have expressly limited the remaindermento heirs of the daughter's blood if he intended this result.j. GRANILLE CLARKCAN A THIRD PARTY BENEFICIARY WHO IS NOT A PAYEEENFORCE A CONTRACT FOR HIS BENEFIT?In contemplation of divorce, H, the husband, made a valid con-tract with W, his wife, providing that he would pay her a certainsum monthly for the support and maintenance of their children23 Laws v. Davis, 34 Ohio App. 157, 170 N. E. 601 (1930)."I. . the adopted child shall stand in the same relation forall purposes to such declarant as he or she would be in if they werea child born in lawful wedlock . . .", as cited in Laws v. Davis,supra note 13.CASE COMMENTSuntil they should reach their majority. The divorce was obtainedand G, the guardian of the children, sues to enforce the back pay-ments due under the contract. The majority of the court said thatonly W could sue on the contract since she was both promisee andpayee. Since the children were neither, they were incidental bene-ficiaries only and could not enforce a contract for their benefit. Thedissenting opinion agreed that the plaintiff could not recover as athird party beneficiary, but argued that there could be a recoveryon the ground that the contract created a trust obligation against Hand in favor of W for the benefit of the children and that a suit couldbe brought by the guardian against H, joining W, to enforce thistrust.2In only one case have I been able to find and support for theholding that the mother and not the child is the only one who canenfore the contract and there it is in the form of dictum. Willistonsays, however, that everywhere a child is able to enforce a contractbetween the father and mother for his support and maintenance, andusually as a third party beneficiary.' Certainly the child is a credi-tor beneficiary rather than a donee beneficiary due to the father'scontinuing duty to support him, regardless of the contract. Thisshould enable the child to sue on the contract in his own name.In Brill v. BriWV the father of a bastard agreed to pay the mothercertain sums at stated intervals for the support and maintenance ofthe child. It was held that the child could enforce the contractagainst the promisor and that the mother could not release its interest.The reason given for the holding was that, ". . . the primary andmain benefit is for Edward, the third party involved."' Also in Wein-berger v. Van Hessen7 the infant was allowed to enforce a stranger'scontract with its mother to support the child for life. By analogyKentucky seems to permit the infant to enforce the contract againstthe promisor in such a case. In Wickliffe's Ex'rs. v. Smith 8 the evi-dence showed that the defandant had agreed to pay a certain sum toa bank to the order of the promisee, a citizens' committee, for thepurpose of building a certain road in that county. In deciding thatcase the Kentucky Court of Appeals held that the county was aPercival v. Luce, 114 F. (2d) 774, 775 (C. C. A. 9th, 1940).'Percival v. Luce, 114 F. (2d) 774 (C. C. A. 9th, 1940).'Franklin v. Ford, 13 Ga. App. 469, 79 S. E. 366, 367 (1913)(Dictum).12 Williston, Contracts (rev. ed. 1936) sec. 356.S282 Pa. 276, 127 Atl. 840 (1925).'Id. at 842. (In the later case of Book's Estate, 297 Pa. 543, 147Atl. 608, 610 (1929) the court said that the reason for the enforcementof the Brill contract was public policy, but in the Brill case itselfthere is no mention of public policy as such.)7 260 N. Y. 294, 183 N. E. 429 (1932). (Though the infant wouldbecome payee upon reaching his majority, he could not sue untilthen. Therefore, for the payments prior to his attaining his majoritythe situation would be analogous to that in the Luce case.).8225 Ky. 796, 10 S. W. (2d) 291 (1928).]KENTUCEY LAW JOURNALproper party plaintiff in the committee's action against the promisor,although the county was neither promisee nor payee and there wasnothing to show that the committee was its servant or agent. In ananalogous situation the beneficiary was allowed to enforce a contractbetween others to pay his debt to a fourth party, even though he wasnot a payee.0Not only is the weight of authority contra to the principal case,but it is submitted that it is illogical also, if we are to support theAmerican rule respecting obligee beneficiaries. It is admitted thatthe plaintiff can not recover if he is an incidental beneficiary" and itis also admitted that there can be a recovery if he is a direct and notan incidental beneficiary. Therefore, it is hard to follow the court'sreasoning in denying relief to the children as incidental beneficiariesin the light of its statement that:"It is true that the money which the defendant promised topay Dorothy Lehman was to be used by her for the support andmaintenance of the minors. It is also true that if the money hadbeen so used, such use would have benefitted the minors."'-Despite this admission the court assumed that the children were onlyindirect and incidental beneficiaries, since they were neither promi-sees nor payees. But who else will benefit from the contract? Thepromisee will not, since she must use the money for the support andmaintenance of the children as promided by the contract, and heradmission of this fact is shown by the appointment of a guardian tobring the action, when she might perhaps have sued as promisee.-The question who is the direct beneficiary is determined by the inten-tion of the parties."' The contract itself, ' and a reasonable interpre-tation of the evidence, show that the children were intended to be thedirect beneficiaries.That the children were direct beneficiaries is shown conclusivelyby ascertaining the nature of an incidental beneficiary. A definitionwhich is taken from a Kentucky case says: ". . . such person is anincidental beneficiary if the benefits to him are merely incidental tothe performance of the promise and if he is neither a donee bene-ficiary nor a creditor beneficiary."" Suppose B contracts with A to'Tasin v. Bastress, 284 Pa. 47, 130 Atl. 417 (1925). (Here themoney was to be paid to the creditor by the promisor and not to thebeneficiary.)"National Bank v. Grand Lodge, 98 U. S. 123 (1878; Percivalv. Luce, 114 F. (2d) 774, 775 (C. C. A. 9th, 1940) (Dictum); Spur-rier et al. v. Burnett et al., 207 Ky. 736, 270 S. W. 25 (1925).'Percival v. Luce, supra n. 10.' Croker v. New York Trust Co., 245 N. Y. 17, 156 N. E. 81 (1927);2 Williston, Contracts (rev. ed. 1936) secs. 390, 392." Standard Oil Co. of New Jersey v. National Surety Co., 234 Ky.764, 768, 29 S. W. (2d) 29, 31 (1930) (Dictum); Banker v. Breaux,133 Tex. 183, 128 S. W. (2d) 23 (1939)."Supra n. 1.Hendrix Mill & Lumber Co. et al. v. Meador et al., 228 Ky. 844,848, 16 S. W. (2d) 482, 483 (1929); see supra n. 4.CASE COMM31ENTS 487erect an expensive building on A's land. C's adjoining land wouldbe enhanced in value by the performance of the contract, but he cannot enforce the contract, since it was not made for his benefit."Another example of an incidental beneficiary occurred in a casewhere A promised to pay B's expenses on a certain expedition. Thelatter's creditors could not sue on the contract, for there was no intentto benefit them, and they were only incidental beneficiaries? 7 In acase where an abstracter of title for a vendor was negligent, he wasnot liable to the vendee for the resulting damage. The latter was notintended to be benefitted by the contract between the vendor and theabstracter.' In the Luce case the children were specifically men-tioned in the contract and evidently occupied such an important posi-tion in the contemplation of the parties that it is impossible to agreewith the court's assertion that they are only incidental beneficiaries.The courts that have considered the situation in the principalcase, and yet have not permitted a recovery by the children as thirdparty beneficiaries, often struggle to avoid a harsh result by permit-ting a recovery as a result of what seems to be strained reasoning.1 'Possibly one way to permit the plaintiff to recover in these jurisdic-tions is on the ground that a trust was created for the benefit of thechildren, with the promisee as trustee of the promise.We must examine the contract of the principal case, as well asthe circumstances surrounding it, to ascertain whether a trust wascreated. The contract provides,"Second: For the support and maintenance of the aforesaidchildren the party of the first part shall pay to the party of thesecond part the sum of $25.00 per month for each of said chil-dren, the payment of said sum of $25.00 per month to discontinueas each child attains the age of majority."' ""Restatement, Contracts (1932) sec. 133.112 Williston, Contracts (rev. ed. 1936) sec. 402.' Shine v. Nash Abstract & Investment Co., 217 Ala. 498, 117 So.47 (1928). For additional cases on this point see footnote 9 in 2Williston, supra n. 8. Also the creditor mentioned in n. 9, supra, is anincidental beneficiary according to 2 Williston, Contracts (rev. ed.1936) sec. 356.' Another reason to permit the children to recover as third partybeneficiaries is the "Close Relationship Doctrine" which has consider-able support in the United States, acccording to Clarke v. McFarland'sEx'rs., 35 Ky. (5 Dana) 45, 48 (1837) (Argument); supra n. 7 at page430; 2 Williston, Contracts (rev. ed. 1936) sec. 357; Note (1926) 24Michigan Law Review 414. Williston says that this view allows thechild to recover from the promisor on the ground that his legal per-sonality merges with that of the promisee's, his mother, due to theirclose relationship, so as to allow him to sue on the grounds that hehas become promisee. However, Williston criticizes this doctrine asa crude fiction."Supra n. 1.KENTUOKY LAw JOURNALThe following example will best explain how the trust theory isapplied under these circumstances. The first real example of thistype of trust occurred in the case of Tomlinson v. Gill, 2 where Apromised B that if she would consent to his being appointed adminis-trator of her deceased husband's estate, he would pay the latter'sdebts to the extent that they were not paid by the estate. A creditorenforced this agreement against A on the ground that a trust wascreated for his benefit with B as trustee. This could not be a trust,for a trustee must act so as to manifest an intention to act as trustee.=Here there is nothing to indicate that B realized that she was a trus-tee or intended to act as one. Therefore, this is a typical third partybeneficiary case and a recovery would be allowed in the United Stateson that groundr In another case A advanced money to M at a cer-tain rate of interest to be paid to her for life. Upon A's death M wasto hold it for the use of B and pay it over at a certain time to B. Itwas held that M was trustee for A during her life and for B after-wards. ' It is submitted that this case was incorrectly decided.Since M paid interest, he had the use of the money and was underonly a personal obligation to repay the money as a debt." Therefore,there could be no trust there, for a promisor can not be trustee of hisown debt.' In another case a father made a sealed contract withpromisees to the effect that his executors would pay £60,000 to themin trust for his illegitimate sons. The latter were able to enforce thisagreement on the ground that a trust was created for their benefit.This was probably not a trust, for the so-called trustees here wouldmake themselves liable to the beneficiaries by not suing. This showedthat they did not realize that there was a trust. For there to be atrust the trustee must realize that there is a trust and manifest anintention to act as trustee.'It is submitted that this class of cases is wrong in holding that atrust arises. The words are words of promise and not of trust."-1 Amb. 330 (Ch. 1756), 27 Eng. Reprint 221. Contra: West v.Houghton, L. R. 4 C. P. 197 (1879).'1 Scott, The Law of Trusts (1939) sec. 14.2 and sec. 24."Steele v. Clarke, 77 Ill. 471 (1875); Restatement, Trusts (1935)sec. 14.Moore v. Darton, 4 DeG. & Sm. 517 (V. C. 1851), 64 EnglishReprint 938. Contra: In re Caplan's Estate. Bulbreck v. Sylvester,45 L. J. Ch. 280 (1876). It probably overrules Moore v. Darton,though it does not specifically mention it. Also Richard v. Delbridge,L. R. 18 Eq. 11 (1874) overruled a somewhat similar case, Morgan v.Malleson, L. R. 10 Eq. 475 (1870).11 Scott, The Law of Trusts (1939) sec. 14.4; 2 Williston, Con-tracts (rev. ed. 1936) sec. 360; Restatement, Trusts (1935) sec. 14."Restatement, Trusts (1935) sec. 14."Fletcher v. Fletcher, 4 Hare, 67 (V. C. 1844), 67 EnglishReprints 564. Contra: Colyear v. Mulgrave, 2 Keen, 81 (Rolls Court1836), 48 English Reprint 559.Supra n. 25."Corbin, Anson on Contracts (Fifth Ed. 1930) sec. 285, foot-note 4.CASE COMMitENTSUsually no trust was mentioned or contemplated.V ' The reason forsuch strained reasoning is that in England a party can not recover ona contract made for his benefit if he is not a party to the contract, andthe courts frequently torture such cases into trusts to avoid a harshresult.' The admission of these facts by the English Courts is indi-cated by the fact that later cases renounce the trust theory."The test whether there is a trust or a third party beneficiarycontract would seem to be whether the payee is to collect the moneyunder a duty as trustee and pay the proceeds to a third person, whileperforming all the other duties of a trustee; or whether the thirdperson can collect the money.' The other duties of a trustee wouldbe to keep the trust money separate from his own"' and care for it forthe benefit of the beneficiary.' This would not make the bene-ficiaries in circumstances similar to the Luce case cestuis of a trust,as it might seem at first glance, for the parent or guardian acts forthem in collecting the money and any action brought is treated asthat of the child.It is submitted that the Luce case is wrong and conflicts more-over with the weight of authority. This is an ordinary case of athird party beneficiary which is sometimes confused with a trust.E. R. WEBBTHE BREACH OF A PENAL STATUTE WHICH HAS FOR ITSPURPOSE THE PROTECTION OF THE INDIVIDUALMEMBERS OF THE GENERAL PUBLIC ASEVIDENCE OF NEGLIGENCEA recent California case' raises a matter which has caused agreat deal of disagreement and uncertainty among the differentcourts in the field of Torts. Plaintiff was driving her car andattempted to make a left turn. Defendant's street car approachedat a speed in excess of the maximum speed provided for by statuteand collided with the car. The opinion in deciding for the plain-tiff said:"If the jury believed that the defendant, Sherman wastraveling at a rate of speed in excess of 15 miles an hour,-andaccording to his own testimony he was so traveling-thedefendant's negligence was established. The violation of anordinance or statute is negligence per se."" Corbin, Contracts for the Benefit of Third Persons (1930) 46Law Quarterly Review 12, 17; Note (1932) 81 A. L. R. 1271, 1272.1 Scott, The Law of Trusts (1939) sec. 14.4."Vandepitte v. Preferred Accident Insurance Corporation (P. C.1933) A. C. 70, 77; In re Rotherham Alum and Chemical Co., 25 Ch.Div. 103, 111 (1883); In re Empress Engineering Co., 16 Ch. Div. 125,127 (1880); West v. Houghton, L. R. 4 C. P. 197 (1879). Colyear v.Mulgrave, 2 Keen, 81 (Rolls Court 1836), 48 English Report 559; 2Williston, Contracts (rev. ed. 1936) sec. 360."1 Scott, The Law of Trusts (1939) sec. 14.2."Ibid."Ibid. and sec. 14.'93 Pac. (2) 135 (1939).K. L. J.-9

Can a Third Party Beneficiary Who is Not a Payee Enforce a Contract for His Benefit?

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Can a Third Party Beneficiary Who is Not a Payee Enforce a Contract for His Benefit?

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